ACCA Applied Knowledge · Business and Technology · Political and legal factors affecting business
A government announces that from next year it will introduce a new tax on imported steel and offer subsidies to domestic steel producers. A domestic car manufacturer uses PESTEL analysis to assess the impact of this announcement. Which of the following factors in the analysis is MOST directly illustrated by the announcement?
The announcement is mainly a political factor. Import taxes and subsidies are instruments of government trade and industrial policy, so PESTEL classifies them as political, even though they may later influence costs and prices, which are economic consequences rather than the source of the change.
- APolitical factors, because the measures are government policy on trade and intervention in industryCorrect
- BEconomic factors, because the measures will only affect the exchange rate and interest rates
- CSocial factors, because the measures change consumer attitudes to steel products
Explanation
Import taxes (tariffs) and subsidies are tools of government trade and industrial policy, so they fall under the political element of PESTEL. Although they may later affect costs and prices (economic effects), the source of the change is government action. The social option is wrong because nothing in the announcement concerns demographics or attitudes.
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